tv Bloomberg Markets European Open Bloomberg February 16, 2021 2:00am-4:00am EST
anna: welcome to "bloomberg markets: the european open." i'm anna edwards live in london. today, the markets say the global equity rally marches on, hopes a widening vaccine rollout will boost recovery as the cash trade is less than a howard -- an hour away. u.s. energy crisis deepens. prices soared to record levels with at least 5 million people losing power amid the deep freeze.
rally rolls on, futures push higher on hopes the vaccine rollout will boost recovery. jp morgan says the markets are the most complacent into decades. the final lockdown, the u.k. prime minister boris johnson is gradually drawing up plans to ease restrictions in the u.k., wanting this lockdown to be the last. welcome to the program. just under an hour from the start of cash equities trading. on the futures picture, we were without the u.s. yesterday so without that leadership we get from u.s. trading, but european futures moved tentatively to the upside. the ftse 100, more tentative to the upside. euro stoxx 50 futures up .1%. looking at the u.s. story, we had futures pointing to the upside through yesterday's session, even though we weren't anticipating trading yesterday and that continues to be the case. s&p futures point higher, nasdaq futures point higher, dow futures winning out of the three. let's get to breaking news, the
grant -- glencore numbers coming through. world number one commodities trader giving their numbers and they seem to have beaten on a number of measures. full-year adjusted ebitda, 5.6 billion dollars against an estimate of 10.72. they are talking about a resumption of distribution, recommending to holders the distribution of $0.12 a share, so the non-cash impairment charges have amounted to $5.9 billion, turning red on the screen. ebitda beat from glencore. they will start paying money out to shareholders. this is benefiting from metals prices on the rise, also in the trading side of the business which is a part of the story, how much volatility of 2020, how much has that benefited? ivan glasenberg will be stepping
away, leaving things with gary nagle. there will be focus on the handover, even if we are not sure of the timing. that is the picture when it comes to the earning story from glencore. the global equity rally continues with european and u.s. futures pointing in the green. 10 year treasury yields up to the highest in almost a year amid this week's global that selloff. brent crude edging higher after closing at its highest in almost 13 months. let's get into a conversation, laura cooper, mliv macro strategist joins me on set in real life in person. let's start with the energy picture. i mentioned oil prices and supply and demand both being reshaped, it seems, by what is going on in texas and further afield. because of this very cold weather. looking at the futures, we seem to be getting bullish signals. what is your expectation around energy? laura: when we look at the
futures curve in oil, is in steep backwardation, which seems a bullish signal, reflective of the tight supply constrained. we have about one million barrels of u.s. oil pulled off-line as a result of this energy crisis, and we also have russia signaling they see the market back in balance already. when we add to that the demand that is playing into it, the fact that markets are essentially pricing upbeat growth recovery, looking past the pandemic, that is supporting prices above $60 a barrel. yes, we are seeing overbought conditions that could signal a near-term pullback. ultimately i do think the sustainable supports are still there to support this rally even further. anna: the question of the day is will we get to 50 or 71st? from what you've said, it seems we are heading upwards? laura: that seems to be the case. the greatest risk is coming from a couple of factors. one is demand. do we not see that actual
recovery the way markets are pricing in? the iea came out last weekend revised downward their forecast. when we look at the potential risks around virus variants. will not begin to feed into the market narrative you may not actually get this upbeat demand prospect being priced in on account of the vaccine rollout's continuing? anna: i don't know, how much our the commodities -- how much are the commodities on your radar, but a commodities super cycle is something we've talked to a lot of guests about. i talked to saxo bank also managing -- mentioning it. glencore reinstating their dividend, but what are you hearing on that front? laura: there is a narrative in the markets we are on the verge of a new super cycle. the scene four super cycles in the past 100 years and they passed peak in 1970 and 2008.
when we look at metal prices at multiyear highs, platinum and copper at multiyear highs, and crude oil, this suggests we could be on the verge of another years long upward momentum and that is driven by this exceptional stimulus coming from both the fiscal side and the monetary side against these demand conditions so we could potentially see this pent-up demand on the consumer side. china, strong demand there. the risk at this point is if we see the chinese credit cycle start to roll over, that could spill into demand, but looking at tight supply constraints now, that is not really on the radar. is this the start of a new super cycle? anna: are we complacent about things? about any of this? i was looking at research from j.p. morgan that said global investors are the least fearful they've been in two decades and perhaps the most greedy. do you see areas that applies?
laura: there are warning signals across a number of market metrics. look at the put call ratio in the s&p 500, at near record lows. when you look at call options frenzy, that is also off the charts. at this point, given markets are pinned on the sample stimulus, the fed is not showing any signs of tightening conditions anytime soon, there is expectation pent-up demand will be unleashed once lockdowns are lifted. that is underpinning this euphoria and markets. it does seem to be this by everything rally -- buy every thing rally and things continue to go in motion without the force against it until one day, there is and i think markets are waiting for that catalyst and the risk is they could be caught off guard. anna: and i wonder how much a force that bond market might play and the yield on the rise. we will pick up that conversation with some of our guests.
1.23 percent yield on the u.s. 10 year. laura cooper, macro strategist. next, the latest on the energy crisis that has crippled the texan power system and sent prices soaring to record levels. next hour, we will talk about the u.k. budget and look ahead to early march and the budget and the outlook for the u.k. economy with the ifsp deputy director. later, we will speak to the irish finance minister about his country's recovery from coronavirus. that will be shortly after 8:30 london time. this is bloomberg. ♪
continuation of reflation themes, the market focusing on the positives. in texas, we see negatives. brent crude edging higher today after closing at its highest in 13 months. a deepening crisis in the u.s. is disrupting production, forcing the shutdown of some of the biggest refineries and leaving millions without power. let's get details with our executive editor for energy and commodities will kennedy. this matters because it is moving global oil prices, energy prices. this is an interesting story because it takes on a supply and demand dimension. in terms of the demand story, the cold weather, the arctic weather that has been blown as far south as the gulf of mexico. i guess thinking about how long this lasts depend on how long it remains cold. what is the insight? will: i think today will be another tough day for millions of households throughout the central u.s.. if it is forecast to remain
extremely cold. what has happened in the last 12 hours or so, the problems we saw in texas yesterday is starting to spread to other parts of the u.s., 14 states, that part of the country has had to institute rolling blackouts and there is a risk the power supply. right now, this is worsening. the cold weather is expected to alleviate a little later this week, but we are right in the middle of it at the moment. anna: it is a perfect or very imperfect storm, because it is pushing up demand for energy, for electricity in particular at a time when supply of electricity is made more difficult by the weather. tell us about the disruption we are seeing to refining, to exports of lng, the wind industry, as well. will: that's right, several things constraining power supply. some windmills which weren't
geared up to work in winter weather, started to freeze yesterday. more significantly, in gas -- really constrained gas production alongside oil. at a time when gas demand was soaring, it was proving impossible to supply everyone, whether that is power plants, households, businesses, lng. it seems some power plants in the u.s. weren't getting the gas they needed. refineries aren't being able to work in these icy temperatures, which they are not prepared for so some of the country's biggest plants owned by exxon were forced to shut down. it is having a cascading effect through different parts of the energy system are at a time, people are desperate for electricity to heat their homes, natural gas, lpg, and heating oil.
it is working both ways. anna: bloomberg's executive editor for energy and commodities will kennedy with the latest on the u.s. cascading blackouts. we are joined for a broader look at the energy space and beyond. the head of european equity strategy at societe generale. good to speak to you and we will get to the broader equity themes in a moment but if i could start with the energy sector and how that intersects with your world, what are your expectations for energy prices because we talk to investors who don't want to invest large amounts of money in oil at this point and energies they see as on their way out. does that leave us possibly with a spike in prices as underinvestment in that part of the industry at a time it may still be needed in the transition could take place? roland: good morning. the energy sectors, you have
a short-term effect and we have an important crisis in the u.s., which is pushing higher energy prices and in the coming days, the sector versus long-term concerns with portfolios, etc. so the way we are positioning is clearly to our long-term view. the recovery in the cycle, higher price, higher oil price. in the u.s., that is pushing on the short-term energy sector, but with a long-term view, all the questions, all the concerns, all the challenges for these sectors remain. that, we are not really pushing the energy sector in our
recommendation right now. anna: instead, you are focused on the future of energy in europe. looking at your notes, you talk about the european green deal basket socgen has compiled. we have a chart that shows extensive outperformance in 2020 from that basket. i assume it is pegged to the way europe is going to spend those recovery funds on new energy. do you see that outperformance of this basket continuing into 2021? roland: the european green deal is a long-term strategy that has been designed by the european commission. they also propose one trillion. it has already started. it is part of the next generation. we will see in the coming years starting this year, money coming and more investment. the goal of the project, the strategy is to reduce massively co2 ivan glasenberg -- co2
emissions and to be carbon neutral. we still think there is a lot of value. anna: what are the types of businesses this basket includes? clearly, the wind business, wind power businesses and the like, but are there other businesses in there that we might not automatically associate with the new energy push? roland: we think about the green deal, energy position, everyone thinks about clean energy. that is the first thing, you think about windfarms everywhere, etc. but the green deal is more than this. if you look at co2 emissions, you need to tackle it in the tech industry, transport, even in housing, in building. what we have done, banked on the
european green deal commission's guidelines. clean energy is one of them but you are also mobility, building renovation, and technology. anna: thank you very much. roland kaloyan from society stays with us on the program. we will get broader thoughts from roland on his equity strategy in our next conversation. let's get a first word news update with laura wright. laura: the wto has chosen the first woman and first african to lead the organization. the former nigerian finance minister will now have to restore trust and the rules-based global trading system hit by protectionism and the pandemic. >> for the first time, you are selecting a woman and an african as director general.
this is groundbreaking and positive. i'm grateful for the trust you have in me, not just as a woman and an african, but also in my knowledge, experience, and as some of you have said, courage and passion. to work with you to undertake the wide-ranging reforms the wto needs to reposition itself for the future. laura: myanmar's military junta has shut down the internet for a second night as part of efforts to stem nationwide protests after it seized power from civilian leaders on february 1. authorities are trying to disrupt telephone and internet access to make it harder for demonstrators to organize. global news, 24 hours a day on air and on bloomberg quicktake powered by 2700 journalists and analysts in more than 120 countries. this is bloomberg. anna: thank you very much. coming up on the program, jp morgan says investors are the
least fearful since the dot-com bubble but with unprecedented stimulus, how much longer can the buy every thing rally roll-on? ♪ when you switch to xfinity mobile, you're choosing to get connected to the most reliable network nationwide, now with 5g included. discover how to save up to $300 a year with shared data starting at $15 a month, or get the lowest price for one line of unlimited. come into your local xfinity store to make the most of your mobile experience. you can shop the latest phones, bring your own device, or trade in for extra savings. stop in or book an appointment to shop safely with peace of mind at your local xfinity store.
anna: welcome back to the market open. just under 40 minutes until the start of the trading session. we are losing a little momentum, dax futures fairly flat, cac futures point to the upside as the ftse 100 futures. we were without the u.s. yesterday, futures point upwards by as much as .7% on dow futures. barometer by jp morgan that measures cross asset complacency , positioning, and momentum is nearing its highest level in two decades. global equities have added $7 trillion in value since the start of the new year. roland kaloyan from society gender out is still with us. let me ask -- general is with
us. as we see the retail incitement around -- excitement continue, do you have excitement for stocks at these levels? roland: if you want to summarize where we stand in 2021, i would like to say it is versus the walking dead. we have government entities, a force for riskier assets, for growth, reflation. on the other hand. i mention walking dead because you have a lot of companies last year that are still benefiting from supports from the government. the risk is these companies, when things would regularly normalize somewhat, these companies could reverse and that
is the risk. higher employment, higher savings, less consumption, less confidence, so there are two forces in the market and right now, the market is more focusing on the reflation story and at this point in time, we have intervention from government, very easy -- in the world and the crisis, which seems to be better and the vaccine is helping. because you have all these factors together at the first half of the year, we continue to be constructive on risky assets. anna: and which parts of the equity space are you interested in because you mentioned the risks certain businesses go -- we see corporate bankruptcies in 2021, so does that mean you stay away from -- or you favor things
that will benefit from public spending? is that where you see the highest expectation? roland: above 50, second quarter, i go for cyclicals. public spending is the key word so we go for the three g's. green, gray -- green, the energy position, gray because of public spending in the u.s., so mining, construction, and in the crisis, everyone should go digital right now so we should see investment on digital and i.t. anna: green, gray, and geek for 2021. what about the rise we have seen in treasury yields?
the steepening in the curve we've seen? at what level do you think equities come under pressure from rival yields? roland: when we talk about equities, the end of 2018 when the u.s. yields raised -- reached 3% and we have seen a selloff in equities. we did some calculation and it is fair to ask the question, rising bond yield will clearly push lower equities because we are higher valuation in terms of prices compared to 2018. we did the math and at the end, we found right now at the current evaluation, u.s. and european will sell at 1.5%. if the market is about to deliver growth by the end of the year, we could even top 2.5%.
anna: welcome back to the european market open, 30 minutes until the start of trading for another tuesday morning. this is the picture from the futures. the dax, flipping with the flatline. elsewhere, modest gains as we welcome the u.s. back to the trading fray. bhp has boosted its outlook for the global economy as the rollout for covid-19 vaccines gathers pace. the world's biggest mining business posted a 16% rise in first-half profits as record iron ore profits in western australia help did caching on gains. the results, mid talk of a
commodity super cycle. ceo mike henry wade in. mike: i don't want to get caught up in the terminology per se. we've been saying for some time the outlook for commodities over the medium to long-term is positive. commodities are essential for the world's ongoing development in growth. through the decarbonization transition or the energy transition the world must affect, that will be minerals or metals intensive so the megatrends we see playing out around global population growth, the electrification thematic, the energy transition, all of these bode well for commodity demand over the medium to long-term and in the near term, as the world recovers from the covid, we will see some pretty strong fundamentals as well and hence, we were constructive in our outlook in the results we announced today and that sits behind this record dividend we've announced. rishaad: absolutely, and as we
look ahead, we see geopolitical issues playing out, beijing and canberra at loggerheads. we are seeing coal at the crosshairs of that. are you concerned that may spread into other commodities such as iron ore, which is your bread and butter? mike: so clearly, the ban on australian coal imports into china has hurt the returns of our coal business during the half and has hurt the industry more broadly. we are certainly not planning on the basis that is going to turn the corner anytime soon. however, i think both parties realize the importance of iron ore supply to the trade relationship between the two nations. there is certainly benefit to australia to it continuing and to the chinese economy. i think the planning basis or the assumption we have is that
demand in china will remain strong, third year running of over a billion tons of oil -- steel production and that bodes well for the outlook for iron ore demand for a producer like bhp. haslinda: so to that end, mike, in terms of iron or demand from china, give a sense of how strong that could be taking into account how strongly the chinese economy is recovering. mike: great question. the economic recovery underway there is really solid. we see the pull-through in terms of in use demand for steel so it is not -- we are not seeing the strength in the recovery being a short-term thing. we think there is durability to that. you back that up then with the recovery underway elsewhere in the world and some ongoing supply challenges, remember, in particular out of brazil. that points to some robust near-term fundamentals for iron ore and we are expecting there will be a degree of price support for some time to come. haslinda: before we let you go,
your thoughts on the u.s. energy crisis, which is deepening. that is pushing oil prices beyond $60 a barrel. your thoughts on that? mike: so, the -- if you look at what is playing out in terms of economic recovery, bringing back oil demand coupled with opec action and some uncertainty around what will happen with granting of new leases on federal land in the u.s., which i think the industry is still trying to understand how that is going to play out, all of this is seen a boost in near-term oil and gas prices and this is in line with the thesis we lay out previously, which is we see the investments attractiveness in oil and gas remaining for the next decade and likely beyond. the big pullback we have seen in fresh capital going into the industry in the last year in the face of covid and lower oil prices i think is only going to provide further support for that part of the business. anna: interesting perspective on
oil and gas from the ceo of bhp mike henry, giving us his thoughts on the mining industry more broadly. mike henry didn't put a name to it. jp morgan has decided to call it a commodity super cycle. let's get into a conversation about this with dani burger, who is with us this morning. what are the market dynamics that would lead to a super cycle in law materials? dani: it is the supply and demand side. that is what we have heard jp morgan, goldman sachs argue for years long gains. we've seen that across the metals and all commodities sectors, everything on here from lumber to iron ore to platinum and oil and yes, some of those have idiosyncratic reasons why the supply might be under stress. there is the troubling freeze in texas that has led to higher oil prices.
platinum has its own unique supply constraints and demands because of the environmental friendly push for the auto sector but this is kind of the point, that the supply chain is particularly fragile at the moment. there is trade dispute, congestion, which lead to an environment where we can have this big gain across the commodity space. anna: are investors buying into this narrative? what does positioning look like? is everyone anticipating this super cycle? dani: they certainly are and this goes into the reflationary trade, that we are about to have this big demand boom because of covid, because of that wearing off and pent-up demand. hedge funds' net long position is the most bullish in at least a decade. this is three straight weeks where we've seen new records continually reached. this is the sum of about 20 raw materials. the issue with this is when you see a lot of people positioning one way, that leads to a bigger tail risk because if everyone is
bullish and should things not play out this way or should commodities start to fall, they can add to the selloff, adding fuel to the fire. anna: is this going to be reflationary or inflationary? a big question. dani burger with the latest on commodities and whether we are seeing a new super cycle. i spoke to saxo bank yesterday who agreed with that view. coming up, with millions in the united states facing power cuts as some of the nation's biggest refinery shut down, we discussed the outlook for commodities next. this is bloomberg. ♪
until the start of equity trading and dax futures fairly flat. elsewhere, expectations of modest gains. u.s. futures point to the upside, u.s. cash trading back with us later today. brent crude edging higher after closing at its highest in almost 13 months. a deepening energy crisis in the united states is disrupting production, forcing the shutdown of some of the nation's biggest refineries and leaving millions without power. we are joined by the head of commodities and real assets at s&p dow jones indices. we will come to some of the broader themes around the commodity space at this point, lots to talk about, but in, the near term we are quite preoccupied watching oil prices going higher on the back of cold weather in the united states, 60.07 right now. i wonder how sustained an impact you expect and the impact on supply, how sustained an impact will this have?
fiona: things for having me on. we have seen and will continue to see these spurts of either very cold or very hot weather that can have drastic and immediate impacts on supply, but they don't tend to be very long-lasting. in the case of what we are seeing, particularly in the southern u.s. at the moment, the move to the use of renewable energy sources such as wind technology have actually proved to be a bit troublesome during periods of severe weather so as we go through this period of energy transition, maybe there will be more times when we see these types of disruptions, but they do tend to be relatively short-lived. anna: i wonder what your expectations are for oil prices from here. we heard from the bhp boss who said oil and gas had been underinvested in. clearly this is out of vogue right now because lots of
investors want to talk about sustainability and moving away from energy sources. what is the reluctance -- impact is the reluctance going to have? fiona: there has been a prolonged period of underinvestment across the commodity complex, not just in energy and that will have an impact on supply availability for some period to come, and as we move through the energy transition, rightly or wrongly, we will continue to need oil as a major supply of energy, so there are some tailwinds behind oil prices at the moment, that is for sure. anna: when we look at commodities more broadly, do you see us in a super cycle? jp morgan, goldman sachs, saxo all talking about a super cycle at this point. fiona: i've been in commodity markets for a long time so i remember the first super cycle. i think there are some positive signs for commodities, but we
have seen a few false starts before. i think the key driver if we are likely to see commodities prices continue to move higher will be the dollar, will be just how strong this post pandemic recovery is and particularly what impact the level of coordinated, massive fiscal stimulus has on infrastructure projects and other areas that tend to be real asset heavy. anna: which of the commodities do best out of that? what are your expectations for the makeup of the super cycle. fiona: high think you've got to look at the commodities that are also benefiting from green technology, so we are seeing the industrial metals -- interestingly, commodities are disadvantaged by changes in technology are always looking for ways to do these better or find substitutes, but in the case of the need for green
technology, industrial metals will do very well and that is everything from nickel and copper to silver and platinum. they are areas people should keep an eye on, and even in the agricultural space, while the supply cycles tend to be shorter, we are seeing a move to rebuilding stock, particularly in china and that has been really supportive to those prices, as well. anna: thinking about agricultural food prices, what did you see as the big picture, because we get a lot of reporting around particular food markets and soft commodities. are you seeing anything that suggests yes, agriculture will be very much part of this and higher food prices will be part of the narrative? fiona: we know that the concept of higher food prices is always a concern, particularly to government and in third world countries so it is likely to
stay in the narrative of investors' minds, but because the supply cycles are relatively short, we grow wheat in both the northern and southern hemisphere and those cycles have been every six months, so we can rebuild supply relatively quickly, although obviously they are highly dependent on the weather. but we have seen a drawdown in stocks globally. we have seen massive purchases of corn and soybeans from china, and we have seen the risk that we producers like russia will consider putting export taxes on to maintain their own supply. we are certainly seeing a lot of things happen in the agricultural space which would suggest prices may remain elevated for some time. anna: i don't think i've heard anything from you so far this morning that sounds deflationary, so if we are thinking about where this takes us from a broader perspective, what kind of inflation and commodity prices are we talking about when we are trying to
assess how broad the inflation push or how high the inflation push is going to take us over the next few years? fiona: i think we started from such a low base that even as small as we've seen an initial start to uptick in prices could have a large inflationary impact. it just goes back to how quickly this post economic recovery starts to kick in, where the fiscal stimulus is allocated, and how quickly we can ramp supply backup. things like industrial metals take a significant number of years to increase production, so it is more likely than not that we will see a period of inflationary commodity prices. just the extent to which that happens remains unclear at this point. anna: a super cycle isn't a bubble, but do you see any
bubbly conditions? any inexplicable buying in some of these commodities? does it all makes sense? fiona: i always worry when commodities are top of mind for every day investors, because it is not something that tends to take up a lot of air time and so while that is great if you are in commodity markets, i do worry you start to see some of those bubbly conditions, but i certainly think for now, what we are seeing is real world supply and demand dynamics and that there are a variety of commodity markets where higher prices are justified. anna: thanks for your time. fiona boal, headed of commodities and real assets at s&p dow jones indices. thank you for joining us. let's get a bloomberg first word news update with laura wright. laura: the greek prime minister
is calling on the eu to ensure there are no more delays to vaccine supplies. the commission president have faced it is as and for the slow pace of the rollout. he says they can't afford any more missteps. >> we have the capacity to administer maybe more than we are currently administering and we have the infrastructure in place. it is simply a question of getting our hands on vaccines and this is, at the end of the day european decision. , alaura: boris johnson wants the current national lockdown to be the last. he's drawing up plans for a gradual lifting of restrictions across the country that aims to set target dates for when the curbs will be eased. he says his priority will be to try to reopen schools from march 8. the government will publish its plans on february 22. p.m. johnson: we want this lockdown to be the last, and we want progress to be cautious,
but also irreversible. laura: the wto has chosen ngozi okonjo-iweala to be the first woman and the first african to lead the organization. the former nigerian finance minister will now have to restore trust and the rules-based global trading system hit by protectionism and the pandemic. >> for the first time of 70 years at the wto, you are selecting a woman and an african as director general. this is groundbreaking and positive. i'm grateful for the trust you have in me, not just as a woman and an african, but also in my knowledge, experience, and as some of you have said, courage and passion. to work with you to undertake the wide-ranging reforms the wto needs to reposition itself for the future. laura: myanmar's military junta has shut down the internet for a second straight night as part of
efforts to stem nationwide protests after it seized power from civilian leaders on february 1. authorities are trying to disrupt telephone and internet access to make it harder for demonstrators to organize. global news, 24 hours a day on air and on bloomberg quicktake powered by 2700 journalists and analysts in more than 120 countries. this is bloomberg. anna: laura, thank you very much. coming up, we will bring you stocks to watch this morning. a big focus on commodities and businesses that make money from them. mining, trading, both. glencore, that business reinstating its dividend. we will get the stocks to watch next. this is bloomberg. ♪
anna: welcome back to the european market open. seven minutes to go and european equity markets looked as if they could be fairly flat at the start of trade. the cac and few t futures pointing -- ftse futures pointing higher, the dax a little sluggish. we will start with the mining sector, the mining and trading of commodities and what we've heard from glencore. dani: we had materials and oil and gas do well yesterday. it looks like they will do well today. glencore, reinstating their dividend, beating for estimates. bhp, a similar positive or earnings from them with record dividend. this shows a lot of mining and
materials companies not only see trading strong, but a bounceback for the economies that began in china looks like it will continue for the rest of the world. that is allowing them to be positive on their outlook. anna: when looking at any clues about the global growth cycle, interesting to look at companies like glencore and companies like dsm, specialty chemicals businesses and the clues they can tell us about what kind of appetite there is for their products. dani: dsm, very much in the business of raw materials as well. they did have higher costs, but beat expectations. the dividend, also unchanged. we spoke to the ceo earlier. this is what they had to say. geraldine: we saw in q4 a nice step up in activity. 14% increase in volumes in our materials business related to the automotive sector, but here, we flag the question mark of how much is that a sustained
recovery or whether it is more of a stocking effect across the value chain? i think it will take a little longer for everyone to really be able to tell. dani: may be uncertainty in materials, but an overall positive outlook. anna: packaged food, kerry group in focus. dani: a review of their ireland milk business. they are not saying whether this will lead to action. it could allow shares to rally, the thought they might spin it off. they've done a lot of deals, including buying a spanish milk business. it is also at the center of a shortselling dispute, so at the moment, trying to shake off those reports saying they are full of errors and inaccuracies. anna: lots to think about at the start of tuesday's equity trading session. coming up, we will bring you the market open this tuesday morning. futures, pointing to the upside -- fairly flat right now. they were pointing higher but we
anna: welcome back to the european market open. a minute to go until the start of cash equity trading. the u.s. energy crisis deepens, prices soar to record levels with a 5 million people losing power amid a deep freeze. turning iron ore into gold. investors rewarded with a record payoff at glencore. the final lockdown, boris johnson is gradually drawing up plans to ease pandemic restrictions wanting this lockdown to be the last.
let's look at where the futures are now. we went into the programming with futures flat, and that continues to be the case. watching with interest this earnings season, particularly today, the commodities dimension to it, companies having confidence to come back to the market and pay more money to shareholders. we are getting into european equity markets, the ftse 100 looks fairly flat. you can see the trend in government bond markets has been interesting recently. he seemed to have turned a corner. the trade the last couple of days has been to sell government debt and buying equities. that seems different today, we seem to be buying government debt. the ftse 100 is up 0.4%. the french cac quarante moves to
the upside. we wait for the dax to get into its stride, that could add downside drag to the markets. the stoxx 600 up 0.2%. european equity markets opening broadly flat to positive. 10 year treasury yields jump 2.4%, the highest in almost a year amid the global debt selloff. rank prude -- brent crude -- let's get into a conversation with thushka jeannequin, executive director of global strategy team / global strategist, jpmorgan chase bank. european equity markets making moves to the upside this morning, that comes in the context of higher levels for global equity markets, and we see the record taken out in various geographies. what appetite do you have for european equities at this time? thushka: thank you for having me
on. european equities aren't interesting place at the moment. we like broad-based equity exposure. we are positive on equity markets relative to bonds. within that we like exposure to cyclical markets. they give you a leverage to the reopening play we are expecting in the second half. we expect that to be above trend growth for this year. your is well-placed to benefit from that reopening. there have been delays with the rolet of vaccines domestically in europe, but we see that as a delay rather than a derailment. the other benefits for europe at the moment, we talked about clinical risk premium especially in italy, and we have seen that recede somewhat with president draghi taking over. when we think about growth data
in the next -- what we get later today, we have learned european economies are dealing better with the lockdowns than in the previous phases of the lockdowns. we look at revision ratios for economic data as well as earnings, which have held up very well in the last quarter. europe is a preferred market because of it cyclical exposure, but from a domestic perspective we see strong policy support whether fiscal as well as monetary. anna: when it comes to the earnings story around commodities, and we will come back to that and a moment, you mentioned tail risk when it comes to italy. do you still see that having further to give? has that move already taken place or could keep playing out? thushka: we see it as a
near-term removal of risks in italy. it is hard to say it is necessarily a long-term change, but i would say a few things support the rally for credit risk premium contracting or tightening in europe. the ecb bond purchases when you think about the net issuance in markets like italy, it is a massive negative, 100 billion of net issuance. you add in the european recovery fund, and with draghi at the leadership, that means the usage of that could be more effective than expected in the past. we still expect modest tightening. we still expect modest tightening that could make new all-time highs given the central bank support and low overall bond yield. a lot has happened already from
a small carry position rather than major capital appreciation. anna: where do you stand on assets? we have had earnings reports from a sector that is heavily weighted in london around commodities. we will get further into the commodities conversation later on in this half-hour, but in terms of u.k. assets, what is guiding your expectations for the ftse, the 250, the global narrative versus the domestic? thushka: in terms of equity markets, we had a preference for other global markets, whether the u.s. or the euro area or emerging markets in general, relative to the u.k. for quite a long time. very recently we closed that position where we hand the u.k. as the least preferred market. mostly because, yes, it
underperformed significantly over the last 12 months. we see value as you mentioned in commodity markets, and of the u.k. would benefit very strongly if there was a sustained rotation to value sectors. for the moment, we are neutral on the equity markets in the u.k., the ftse 100. we do see reasons for preference for the domestic economy relative to the ftse 100, where most of your earnings are from foreign companies. essentially, for u.k. assets, we see sterling having appreciated significantly. that is now catching our focus. when we think about the medium-term outlook for the u.k. economy, we see more uncertainty post-brexit. we are looking at sterling more closely. for the ftse or u.k. equity markets, more neutral the tip to its peers, but we noticed the u.k. would benefit if a value
rotation were to take hold. when you think about energy, banks, pricing for high inflation outcome, the u.k. would be a strong beneficiary. anna: let me pick up on that value rotation. one of the best performing stocks is hsbc. the reflation trade being suggested as the reason for that . some say there is risk in the european banking story, there is risk of bankruptcies, corporate insolvency, therefore they prefer to invest around government spending rather than parts of the recovery story that could be over reliant on the consumer. and those consumer facing businesses. how do you way up where you want to be -- weigh up where you want to be? thushka: that is a fundamental question. for us, when we think about
financials and banks in particular, it is hard for us to have a high conviction positive view when bond yields are low and yield curves are steepening but from a low base and absolute levels are lower. i would say the positives, the provisioning we have had for loan losses is a bit higher than expected, and the reserve is there to be re-utilized and put back to work. the second reason is we have seen central banks in the ecb's case, they are looking to reinstate or allow more dividends to be paid out from banks. if we look at the banking sector in more detail in europe, it would be a valuation case but some tailwinds as the economy reopens, because of the conservative nature of these loan-loss provisions. i am not saying we are overoptimistic, but it would be
a tailwind if that turns out to be higher than expected. anna: thank you very much, thushka jeannequin, executive director of global strategy team / global strategist, jpmorgan chase bank. she stays with us, good to get her thoughts this morning. we must also save time to talk about commodities. coming up, the deep freeze stateside pushes crude higher. the latest sign the reflation trade is alive and well. the narrow story around texas and the freezing, and the broader story around reflation. this is anna: welcome back to the
european market open. at 12 minutes into the european trading session this tuesday morning. the dax in positive territory. futures suggested downside. the banking sector in mining space both move a little higher this morning. we will get further into the conversation about commodities in a few minutes. laura: bhp is boosting its outlook for the global economy as the rollout from covid vaccines gather pace, boosting optimism with investors. expectations for a new commodity super cycle.
profits rose 16% in the first half of iron ore prices. glencore stated its dividend on the back of record trading profits. the world's biggest commodity trader and a fitted volatile oil swings in the first half of 2020 and soaring copper prices. it is the final report under the ceo handing over the reins. lufthansa is in talks about switching to smaller jets. it wants to switch orders from smaller crafts to a smaller long-distance model. it is adapting its fleet to a slump in international travel as the pandemic continues to hit demand. anna: thank you, laura wright. brent crude edging higher after closing at its highest in almost 13 months. a deepening energy crisis in the u.s. is forcing shutdown of the biggest refineries and leaving millions without power. strong earnings from glencore
and bhp are feeling expectations for a new super cycle. >> i think a prolonged period of underinvestment across the commodity complex, not just in energy, that will have an impact on supply for some time to come. as we move through the energy transition, we will continue to need oil as a major supplier of energy. anna: thushka jeannequin, executive director of global strategy team / global strategist, jpmorgan chase bank is still with us. your thoughts on the energy space? maybe i will focus in on oil prices and where we see oil at this juncture. the most immediate concern is getting power to those houses in parts of america. $60 a barrel on wti, is this a
short-term bump up in oil prices ? it has been a long slow drag upwards from negative back in april last year. do you see that move continuing upward? thushka: yes, we do see a modest rise from here for oil prices in particular. you mentioned the supply constraints being one factor. the near term factor does boost the price in the short-term, but when we think about it from a top-down macroeconomic perspective, our views on the global economy and above trend growth estimates, and our expectations that the second half of this year will see a strong reopening are all supportive for the demand side as well. for commodity prices. a few factors supporting supply and demand for crude, when we think about the shale function, what is surprising to us is up
to now we have not seen a big upturn. even though prices are moving higher, without seeing that rebalancing force coming from increased shale production, it is possible to see modestly higher acceleration and oil prices. anna: there does seem to be some surprise discipline in that region. in terms of the earnings story for commodities businesses, the theme seems to be having the confidence and produce the results to increase payouts to shareholders. further distribution from that sector, is that something you are banking on? thushka: we are positioned pro cyclically and energy as part of that mix. we are not banking on a reassertion of dividend, but the question you are asking in a way, is this the start of a
super cycle? is this something we will see in the long term? i think we are more positive on the business cycle argument for higher oil prices. it is harder to see the ingredients for a major super cycle, especially in crude oil commodities, but essentially our view on fiscal stimulus spending, our view on the china stimulus we have had our supportive for the industrial parts of the complex, when you think about copper and steel production. we see these as beneficiary. the second trend in our case is the long-term view is around the greening and decarbonization theme which supports industrials more. anna: in terms of investing in a super cycle, you mentioned your hesitancy about calling it that,
a bull market maybe, maybe not a super cycle. if you think we are in a super cycle would you be tempted to play it directly through commodities or the fx linked to commodities? what is the best way to get involved with this? thushka: i would say, yes, we are looking more at indirect ways, currencies exposed to these commodity adducing economies. you mentioned the earnings profiles have been very strong and surprising to the topside. there are multiple ways to play this if we thought this was a start of a super cycle. for now, our post cyclical positive view on risk markets encapsulates that positive view on energy markets today. anna: all of this talk of cyclical recovery and recovery in commodity prices -- we have
certainly seen treasury markets and sovereign bond markets moving on this theme of late. i spoke to a guest in the last hour who thinks the equity bull market can withstand 1.5% depending on growth conditions, and could withstand two point 5% on u.s. treasury yields. what is your expectation of the link between the two? thushka: we are definitely positive on equities relative to bond markets, that is an easy statement to make. i will say we are expecting bond yields to remain capped, and if they are to rise, it will be gradual, controlled by central banks. we heard from chairman powell last week how far away we are from there measures of success in terms of inflation and employment. even the bond yields can rise, when we look at what is priced into the 12 months ahead, 1.5%
looks reasonable to us, but we expect that to be extremely gradual. our highest conviction view is that any rise in bond yields come alongside an improving economy outlook and will not derail the risk rally. we are not expecting a huge tantrum in the bond space at this stage. when you say, can the markets withstand higher bond yields question mark i would say, yes. 1.5% already looks high to us by year-end. anna: thushka jeannequin, executive director of global strategy team / global strategist, jpmorgan chase bank will be continuing her conversation with us on bloomberg radio at 9:00 a.m. u.k. time. coming up, the energy crisis that crippled texas, and oil prices soaring to record levels it is deepening. we look at the energy transition next.
the energy system in texas and sent prices soaring is deepening. an unprecedented deep freeze has led to 5 million people plunged into darkness. the cold blast is the latest extreme weather highlighting how vulnerable the world has become to unpredictable climate events and raises questions about the bush to renewable energy. -- the push to renewable energy. this situation in texas, does it highlight renewable energies like wind and solar? as well as reading about refinery shutdowns, i have been reading about blades on windmills unable to spin. >> absolutely, even the renewable energy industry has been talking about the importance of grids because when you have a wind turbine, you cannot just swap one in for another. you have to transform the energy system.
this has reignited the debate. whether or not enter is to blame is another question. anna: that will be a debwe will run. what about energy demand? we have seen an increased demand for energy and other parts hit by this unseasonable weather. demand rising is not optimized in places for extreme weather conditions. jess: this is a question about climate change because it is causing us to have extreme weather and different whether than we are used to. the properties we live in and work in our unequipped for this weather. places don't necessarily have central heating and are relying on would to keep their homes warm. we have to ask if buildings are prepared for different kinds of
weather. i wrote last year that in the u.k. we were experiencing an extreme heat wave, but we have not had the are seeing more more. we do not have air conditioning but we also do not have the shading you might have in the mediterranean or middle east where people are used to extreme heat. in all parts of the world people are experiencing weather conditions they are not used to. anna: we need to put more money in energy transportation. we spoke about rolling blackouts in california and texas. jess: the software and hardware that we are using on the grid is something that has been used for quad a long time -- for quite a long time. what happens is businesses that can do it will be paid to turn
anna: welcome back to the european market open, 30 minutes into tuesday's trading session and we see strength in the london market. energy market and banks doing well. let's look at the sector breakdown to get some clues why the ftse 100 is outperforming the dax and the cac. in terms of sectors moving to the upside, we are evenly balanced. we see energy and basic resources moving higher. autos and parts not helping germany much. the banking sector is up 0.3%.
media was a big gainer yesterday, it is at the bottom of the pack today, down 0.5%. laura: the wto has chosen the first woman and african to lead the organization. the former nigerian finance minister will have to restore trust and the global trading system hit by protectionism and the pandemic. >> for the first time in the 73 years of wto, you're selecting a woman and an african as director general. this is groundbreaking and positive. i am grateful for the trust you have in me, not just as a woman and an african but also in my knowledge, experience. some of you had said courage and passion. i will take the wide range in reform the wto needs to position itself for the future. laura: myanmar has shut down
the internet for a second straight night to stem nationwide protests after it seized power from civilian leaders for very one. authorities are trying to interrupt telephone and internet access to make it hard for demonstrators to organize. global news, 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. anna: thank you, laura wright. u.k. politics and economics, the u.k. finances are not sustainable according to a think tank, but the march budget is nothing time to balance the books. joining us now with further analysis is carl emmerson, deputy director, institute for fiscal studies. i take from your research that you see tax increases coming but you think march is too soon.
carl: i think march is far too soon. what the chancellor needs to focus on is firstly, the second emergency support he has in place that expires in a couple months. some will need to be extended or gradually phased out rather than suddenly coming to an abrupt stop. and a strategic set of policies for recovery to help the economy adjust as the u.k. moves to a new normal which will be post-covid, post brexit and moves us toward net zero. that should be the focus of the budget. there is huge amounts of uncertainty about how complete a recovery the economy can make. the bigger bounce back in tax revenues, the less will be needed for tax rises. tax rises are highly likely but not yet inevitable. anna: it will be a political decision to some extent, but
from an economic perspective, what dictates the need for tax rises? does the u.k. stand a chance of growing its way out of this? carl: how complete is the recovery? the fuller the economic recovery, the stronger we will get growth over the next few years and a less need for tax rises. to what extent do we want to push public spending as a response to the virus? we know people have lost six months of injured person teaching -- of in person teaching. how strong is the recovery and to what extent do we want to spend more as a result of the experiences over the last year? anna: the furlough scheme has been a real benefit to those who
needed it. is there scope to be more targeted with support? when you compare the u.k. with other european countries, the u.k. response has been more blanket and there are benefits, it is simpler, but is there room to be more discriminatory? carl: i think we have to be more targeted. the problem with a blanket approach, you risk going too fast for the economy, or alternatively removing it too slowly for parts of the economy, which means we will not get the adjustments that ultimately have to happen. a phased withdrawal does need to be extended, then targeted support where there will be subdued demand for a long time, perhaps the airlines and airports industry is the most obvious one. anna: when we come to tax rises, we might hear something from the
chancellor about tax rises in the future, or he might decide not to mention much on that. what tax rises or tax hikes would be the most appropriate? the government has made commitments about not increasing certain taxes, and there are talks about wealth taxes. carl: not announcing them is sensible because we do not know what size they need to be. it is possible we will not need tax rises, but highly likely we will hear rid they may need to be substantial. historically, if you look back over time, it tends to be national insurance rates that get pushed up when we want to raise significant money. i will not be surprised if there are things the government chooses to do. clearly, the virus changes
everything, and some commitments have to be broken. anna: do you think there is appetite for thinking about a wealth tax, and what does the international experience of that tell us? some taxes we already have in place that people call wealth taxes by another name? carl: there may be some. first, you have to be precise about what is the problem the wealth tax will address. is it discomfort about the current distribution of wealth? that points to a one-off wealth tax to correct the past, or is there a reason you want an ongoing wealth tax that is levied every year going forward, which in some ways is more problematic to the the way it will encourage people to spend rather than save, hurting some individuals harshly.
fundamentally, even if we did go down a route of a wealth tax, it is unlikely to raise on an ongoing basis the sums we will need. it will require more than one tax as a part of the solution. anna: thank you, carl emmerson, deputy director, institute for fiscal studies. coming up, commodities in focus. will wti crude oil prices hit $70 or $50 next? this is bloomberg. ♪
>> we need to move forward to make sure as new vaccines are approved, this approval will happen quickly, and we will not fall behind other countries in terms of how quickly we receive the vaccines. even in brussels at the administrative level and bureaucratic level, the lessons have been -- we have accepted what has happened, and we have learned our lesson. anna: you heard from the greek prime minister speaking exclusively to bloomberg. european shares move higher this morning for a fourth day on
continued optimism lockdowns will be eased as covid cases wan. brent crude closing at its highest in almost 13 months. bitcoin reaching another record, closer to $50,000. bloomberg's rates strategist, oil prices moving higher not just because of the reflation trade but supply concerns in parts of the united states. i know you have been throwing around the question whether we see 50 or 70, what responses do you get where the oil price moves next? >> i think the voices are bullish on oil, and $70 a barrel is more of a possibility given not only across the atlantic the weaker dollar. the weaker dollar played into the bullish oil territory.
i think even $75 to $80 back in 2018 is doable. anna: let me get your thoughts on what is happening in treasury markets. we have seen in the last few days selling of sovereigns and some yields going higher. 1.22 on the u.s. handle, near a one year high. we see a steepness to the curve coming back or increasing. what is the significance of this? ven: i think it will be the market narrative in terms of how it will play out. i think treasury has some way to go. we saw the 10 year rate on budged at 65 basis points.
for months on end last year. traders will take those rates low because of the progress you mentioned and the promise of an economic rebound, those really low rates we saw last year were brought about, but it is not sound economics to have those rates that low anymore. anna: let me get your thoughts on what is going on with bitcoin. not a day seems to go past that we are not talking about that. today we are around the 49,000 level, less than $100 away from 50,000. the valuations are not necessarily based on much. what analysis goes into it for
you? ven: i think we will get to 50000 and probably higher before we see a pullback on technicals. i am not a fan of technicals, but my analysis shows bitcoin is four times more volatile than gold. fundamentally, if you look at the cryptocurrency, it is coming up short. we all know it is expensive. at the moment it seems to think nothing can go wrong. anyone long enough in the markets know it is not determined about what the next buyer will pay for it.
it will go long before its true value is discovered and it could take years before that happens. people need to accommodate the downside but will they do that? will people be patient? we will see. anna: i think the bitcoin price slipped a little as you were talking. thank you for your time, ven ram. 46 minutes into the european trading day. coming up, we will speak to the president of the euro group and irish finance minister, erik nielsen. we will discuss the relationship between the eu and the u.k. post brexit. this is bloomberg. ♪
anna: welcome back to the european market open, 49 minutes into the european trading session pointing modestly to the upside. the european union's finance ministers our meeting today as the bloc contends with a coronavirus that will not abate and economies in recession. the recovery plan will be a key part of the discussion. maria tadeo joins us with an important guest. maria: yes, good morning.
we have a lot to talk about when it comes to the outlook for the european economy. i am joined by erik nielsen, group chief economist / global head of cib research, unicredit bank maria: i am joined by paschal donohoe, minister of finance, republic of ireland. this caught my eye, you say stimulus too quickly is more riskier than doing it too late. that sounds like you are advocating to extend deficit rules for longer and keep stimulus on the table. is that what you will tell other finance ministers? paschal: that decision will be made by our colleagues in the european commission in due time. what you saw in our of europe route meeting was consensus among all ministers regarding the continued need to supporter economies. you mentioned the recent
forecast from the commission in relation to performance of the euro area. it is worth noting in the final quarter of last year, we sorry economies perform better than we would have expected, and overall we had an out turn from last year that showed less decline than we feared but significant decline and too many without a job in the euro area today. we are determined to do what we can to restore economic health and public health, and our focus will be on what is the right policy for the euro area. our colleagues will make a decision on the fiscal bills in due course. maria: as investors, we know this is not a secret but a source of debate, what to do with the fiscal rules. yesterday you did not get a sense that this is a debate coming imminently, or did you
get a sense this is on the table and finance ministers want to talk about the rules as soon as possible? paschal: there is always debate. the fact about these issues is that financial markets and parliaments are raising all over the european union and across the world, it is understandable those issues will be raised with myself and my fellow finance ministers. there are two areas of uncertainty, the first is the consensus regarding the need to support the economy. on top of our stabilizers is the effect of our social system and additional support of 4% of the shared national income of the euro area will be put in place.
we have the recovery fund coming. the signature develop it from the european union will supporter economies at a time of great difficulty. all these things are happening and the commission has indicated at the start of march, they will be having something on these issues. the overall picture at the moment is one of a coordination within the euro area and a desire for the european union and finance ministers to work together to help our economy to recover. we are determined to do that. maria: you mentioned the recovery fund. we know this is a move unprecedented, that the european commission has been tapping markets, but there are officials behind the scenes who say it is difficult to come up with a good recovery fund for 2022-2023 you do not know what the fiscal framework will look like.
is that a fair point? paschal: it is an understandable issue at the moment. the issue has been raised about the fiscal framework up to 2023. they are important issues to be resolved. we have all of 2021 ahead of us. there are lots of conversations we can have that will improve the economic employment conditions in 2022 and 2023. my fellow finance ministers within the european union and the euro area are very much aware of the need to be able to answer those questions in due course, and they will be answered. on we are looking at questions that need to be answered, let's acknowledge the agreement that is there regarding the measures that we have in place. we will be beginning those discussions on the basis of all
that we agree on, and the beneficial effect that measures are having at the moment in supporting our economies in dealing with this disease. maria: i want to go back to your home country. natwest is doing a review and pulling out of that unit, do you have a sense of which way that decision will go? paschal: this is a commercial decision made by natwest, and i believe they are likely to make an announcement soon. i have been engaging with natwest on this issue, and i have emphasized to them the consequences there would be if there were to be a withdrawal. they are an important employer and investor in her economy. i do not have a latest update on
their plans. they will also need to engage with their own employees as well. i expect i will be informed in due course. while our economy is doing well and recovering, any change in our banking landscape is a matter of concern to me. maria: paschal donohoe, minister of finance, republic of ireland, thank you for joining us. we will hopefully see you soon in person. anna: thank you very much look forward to in person interviews, the possibility of being in the same room with people when you see them seems otherworldly. that is it for the european market open. "surveillance: early edition" is up next.